I'm just a little skeptical about how much value there is in this medical data given all the frameworks there already are in place to limit its use (HIPPA and similar). Theoretically, what specific not already illegal thing could google do with this health data that would be harmful to consumers? Ought we just make those things illegal?

From all the evidence I think it's most likely that Google wants fitbit to compete with apple watches and other wearables. To me, it seems like consumers would on net benefit more from deep-pocketed competition with apple in the wearables market.